Noda Refrains From Outlining Steps to Halt Yen Climb

Yoshihiko Noda, Japan's finance minister, pauses as he speaks to the media at the ministry in Tokyo. Photographer: Haruyoshi Yamaguchi/Bloomberg

Aug. 12 (Bloomberg) -- Japanese Finance Minister Yoshihiko
Noda refrained from outlining steps to arrest this year’s 9
percent surge in the yen, prompting the currency to recover its
losses against the dollar.

“We will monitor economic conditions carefully and respond
appropriately,” Noda said in an unscheduled press conference in
Tokyo today. Asked whether action could include currency
intervention, the minister declined to elaborate.

The yen rebounded after Noda made the remarks, having
earlier weakened on speculation policy makers were preparing to
take action after the yen advanced to a 15-year high yesterday.
He pledged to work with Bank of Japan Governor Masaaki Shirakawa,
who said today the bank is closely watching “substantial”
movements in currency and stock markets.

The yen traded little changed at 85.36 per dollar as of
6:36 p.m. in London, after weakening earlier to 85.80. Japan’s
currency appreciated to 84.73 yesterday, the most since July
1995. Growing investor concern that the U.S. economy is slowing
has spurred the yen’s advance, threatening profits of exporters
from Toyota Motor Corp. to Sony Corp.

In a sign policy makers are paying closer attention to the
yen, Bank of Japan executive director Hiroshi Nakaso said at a
press briefing the central bank hasn’t changed its policy since
its Aug. 10 meeting and doesn’t think downside risks for the
economy have increased.

“Markets have been testing the yen’s limit because the
Finance Ministry has done so little” to stem its strength, said
Azusa Kato, an economist at BNP Paribas in Tokyo.

Unlikely to Act

Japanese policy makers are unlikely to act on the yen
immediately because the central bank still thinks the economy
can recover even as the yen climbs, Kato said. Inaction by the
Bank of Japan would diminish the effectiveness of currency
intervention by the Finance Ministry, she said.

Noda and Shirakawa this week pointed out the risks the yen
poses to the nation’s export-led expansion, with Noda saying
that movements have been “one-sided” and that “excessive and
disorderly” movements could destabilize the economy. At the
same time, Shirakawa indicated the nation has been able to
withstand the currency’s advance because profits have improved
since November, the last time the yen traded below 85 a dollar.

Record Sales

Japan hasn’t intervened in the currency markets since March
16, 2004, when the yen was about 109 per dollar. The Bank of
Japan sold 14.8 trillion yen in the first three months of 2004,
after record sales of 20.4 trillion yen in 2003. The currency
ended 2004 at 102.63 to the dollar.

Noda had been silent on the currency last month as the yen
climbed, departing from his predecessor’s attempts to curb
volatility by speaking about foreign-exchange markets. Group of
Seven members have refrained from coordinated intervention for
about a decade, since an effort in 2000 to buttress the euro.

“The yen’s level exceeds our original projections and is
likely to impact domestic production and employment greatly,”
Toshiyuki Shiga, chairman of the Japan Automobile Manufacturers
Association, said in a statement on Aug. 9. “We ask the
government to stabilize the currency while maintaining
international cooperation.”